2017 outlook on renewable energy

My take: Marlene Motyka

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In recent years, renewable energy resources
such as solar and wind generation have
outgrown the alternative label. Throughout
2016, renewables effectively competed against
fossil fuel generation in power markets and
for procurement contracts across the United
States and around the world.
How would you describe the growth drivers that propelled
renewables into the mainstream?
Due to the declining costs of solar and wind technologies as well
as the anticipation of a more carbon-constrained future, today the
global growth of renewable energy is increasingly driven by voluntary
procurement by utilities and corporations. Weve seen an especially
rapid decline in the global levelized cost of electricity (LCOE) of solar
photovoltaic (PV) generationfalling from $315 per MWh in 20091
to just $100 per MWh in 2016. The cost of onshore wind is also
continuing to come down, reaching $68 per MWh this past year.
Perhaps most notably, the global LCOE of offshore wind drastically
declined throughout 2016, falling 22 percent from the beginning
of the year to around $126 per MWh today.2 These improving
economics are empowering many customers to seek greater control
over their energy choices. Fifty-six percent of residential consumers
surveyed as part of the Deloitte 2016 Resources Study cited using
clean energy sources as their most important energy issue.3
Furthermore, a movement toward localized energy procurement
seems to be underway. Were seeing many municipalities across
the country take advantage of community choice aggregation (CCA)
policies that enable governments to procure energy resources,
typically renewables, on behalf of their constituents while retaining
their existing electricity provider for transmission and distribution
services.4 Three times the amount of installed solar PV was procured
by CCAs in 2016 compared to 2015.5 There werent any solar
contracts signed by CCAs the two years prior, so thats a big jump.
Community solar has taken off as well. As noted in the Deloitte
report, Unlocking the value of community solar, these programs
allow customers who are unable to install solar at their homes or
businesses to get their electricity from an offsite distributed solar
system. Installed capacity of community solar systems is estimated
to quadruple in 2016 compared to 2015.6 It is this strong demand
from customers and communities that seems to have allowed
renewables to shed the alternative label and transition into
mainstream resources.
2017 outlook on renewable energy | My take: Marlene Motyka
There was a lot of buzz around corporate renewable
procurement in 2016. Why is this growing source of demand
for renewable energy so significant and what are the drivers
for companies in making these procurement decisions?
The energy industry views direct procurement by corporate buyers
as a viable growth driver at a time when federal policies previously
expected to stimulate growth, such as the Clean Power Plan, have
been called into question. Low-priced power purchase agreements
(PPAs) give companies price certainty that can have a positive impact
on their bottom lines. Additionally, consumers are often demanding
that companies be environmentally responsible; so, investing in
sustainability has become more entrenched in business strategy.
Relative to the landmark year of 2015, corporate PPA signing activity
slowed in 2016, but forecasts for growth remain strong due to
procurement targets. Seventy-one of Fortune 100 companies,
which are among the most influential in the United States, have
set renewable targets or sustainability goals while 22 Fortune 500
companies have committed to going 100 percent renewable.7 Thats
a huge driver of demand, especially since many of those companies
have expressed an interest in signing PPAs. Its also significant to
note that in this past year, some companies matured in their tactics
by engaging with regulators to open up the market. Certain state-
level policies prohibit private offtakers and developer contracts.
Were seeing many corporate buyers jointly ask state utility
legislatures and commissions to address these barriers and foster
a policy landscape that is favorable to corporate procurement.8
Were also seeing some utilities get ahead of the game by offering
green tariff programs that supply corporate customers directly with
renewable energy. Just five of these programs existed in 2015, and
today there are 10 programs nationwide.9
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2017 outlook on renewable energy | My take: Marlene Motyka
Green tariff programs are one example of how utilities are
adapting to this growing consumer demand to choose their
energy supply. What other types of programs are utilities
rolling out to provide customers with the option to consume
renewables?
Utilities are becoming more innovative and responsive to customer
preferences by offering new products and services, many of
which have a renewable energy component. Programs range
from providing residential customers with utility-owned solar
panels to allowing self-consumption,10 or self-supply11 as they
call it in Hawaii, through grid-tied, but customer-owned, solar
and storage systems. Theyre also responding to the previously
mentioned localized energy trend by rolling out utility-led
community solar programs and, as discussed in the Deloitte
report Reinventing Resilience, some utilities are also exploring
how to deploy renewable microgrids at scale.12 Furthermore, Id
like to acknowledge the growing belief that empowering customer
choice will lead to more consumption of renewable energy. A key
tenant to Googles approach to achieving 100 percent renewable
energy purchasing is promoting policies that empower consumers
to choose their energy supply. The company considers this key to
accelerating a global transition to a cleaner grid.13 So as customer
choice gains momentum, its likely that demand for renewable
energy will grow as well.
4
For years, electricity storage has been called the "holy
grail" of the electric grid due to its potentially critical role
in integrating renewable energy, reducing customer energy
costs, and improving grid reliability and resilience. What
is your take on the storage market in 2016 and its growth
potential going forward?
The US energy storage market certainly matured throughout 2016,
demonstrating more robust demand and more dynamic, customer-
cited applications. Mandates for storage deployment in states
such as California and Oregon seem to be propelling the market.
Regulatory bodies across the nation are investigating the various
value streams that storage can bring to the grid and how best to
leverage storage to firm up intermittent renewables. Thus far, the
PJM Interconnection region has enjoyed the most concentrated
growth; however, this year deployments were down relative to last
year due to an interim cap on the frequency regulation market.14
While central large-scale storage systems constitute the majority
of todays installed capacity in PJM and across the United States,
customer-sited, distributed storage systems are projected to
dominate over the next four years.15 Its clear that the synergies
achieved by coupling distributed storage with intermittent renewable
resources will likely drive the market, as many of these behind-
the-meter systems are expected to be tied to solar PV. Currently,
demand charge management is the most common application for
commercial and industrial (C&I) energy storage, but in the longer
term, as more utilities adopt time-of-use (TOU) tariffs, rate arbitrage

opportunities will likely motivate both residential and C&I customers
to invest in solar-plus-storage systems.16 Storage deployments in the
United States are projected to nearly double in 2017 compared to
2016 and grow ninefold from 2015 to 2021;17 so, Id say the prospect
for growth is very strong.
Another strategy that renewable developers and utility
holding companies are employing to increase return is global
diversification. Why now?
Its widely recognized that renewables are leading a transformation
of power markets on a global scale. In 2016, solar and wind power
suppliers around the world demonstrated competitive pricing
compared to other technologies. In countries with auction programs
and tenders, prices fell significantly below $100 per MWh. In a
recent auction in Chile, a solar developer was awarded a contract
just over $29 per MWh, beating out incumbent energy suppliers.18
Success in these auctions makes global diversification attractive
for renewable developers. Furthermore, many foreign power and
utility companies are making investments in the United States to
capture technological innovation and ride the growth of distributed
energy resources (DER). Weve seen several large European
energy companies set up shop in innovation hubs around the
United States to invest in the Internet of Things and data analytics
technologies, especially those that enable more effective integration
of distributed, renewable resources into the grid. They see the
potential for those applications to disrupt their businesses. Instead
of getting disrupted, they intend to be the disrupters.19
2017 outlook on renewable energy | My take: Marlene Motyka
How are markets evolving to support or promote these
developments?
Renewable energy markets matured this year on both a global and
domestic scale, bringing more competition and resource diversity
into the fold. The use of government-led auction mechanisms gained
traction around the world in 2016, especially in countries with
renewable generation targets. As was exemplified in Chile, these
competitive auctions can serve to bring down the price of contracts.
In addition, the Mexican government hosted two auctions in 2016.
Participants in the most recent October tender received an average
of $33 per MWh, which was 30 percent lower than the auction that
took place earlier in the year.20
As for the United States, a notable market change came at the
end of the year when the Federal Energy Regulatory Commission
(FERC) proposed a rule that is expected to attract investment and
open up the market for DER. The FERC is requiring21 each regional
transmission organization and independent system operator to
both define distributed energy resource aggregators as market
participants and create rules for energy storage participation in
wholesale markets. Lack of access to structured markets has likely
been a barrier to growth for DER providers for some time now, so
these new revenue opportunities coupled with increasingly stronger
customer demand will likely foster considerable DER market growth.
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2017 outlook on renewable energy | My take: Marlene Motyka

What's next in 2017?

Save the date
Despite ripples of uncertainty, whether related to US tax policy or
commitments to fighting climate change, the positive momentum November 13-15, 2017
achieved by the renewable energy sector will likely not abate. Large
Deloitte Renewable Energy Seminar
corporations may keep flexing their buying power, and I expect that
Phoenix, Arizona
as the industry becomes increasingly comfortable with corporate
For more information, please contact
renewable procurement, well see more contracts signed with small-
RenewableEnergy@deloitte.com
to medium-size companies. The declining cost of energy storage
should enable further penetration of variable, renewable resources,
and whats really become evident is that the underlying driver for
each of these market trends is customer demand for renewables.
As in past years, in 2017, I expect that the marketplace will innovate
in unexpected ways to give consumers what they want: clean,
affordable renewable energy.

Endnotes
1. Angus McCrone and Ulf Moslener, Global trends in renewable energy investment 2015, Frankfurt
School FS-UNEP; Collaborating Centre for Climate & Sustainable Energy Finance, http://fs-un-
ep-centre.org/sites/default/files/attachments/key_findings.pdf, accessed November 18, 2016.
2. H2 2016 LCOE: Giant fall in generating costs from offshore wind, Bloomberg New Energy
Finance, November 1, 2016, https://about.bnef.com/blog/h2-2016-lcoe-giant-fall-generating-
costs-offshore-wind/, accessed December 9, 2016.
3. Deloitte 2016 Resources Study, Deloitte, https://www2.deloitte.com/us/en/pages/ener-
gy-and-resources/articles/resources.html, accessed December 8, 2016.
4. Community Choice Aggregation webpage, US Department of Energy website, http://apps3.
eere.energy.gov/greenpower/markets/community_choice.shtml, accessed December 8, 2016.
5. Eric Wesoff, Slideshow: Why 2016 Is the Weirdest Year for US Solar, Greentech Media, Octo-
ber 25, 2016, https://www.greentechmedia.com/articles/read/the-weirdest-year-for-us-solar,
accessed November 18, 2016.
12. Reinventing resilience: Defining the model for utility-led renewable microgrids, Deloitte, https://
www2.deloitte.com/us/en/pages/energy-and-resources/articles/microgrids-enchance-grid-re-
silience.html, accessed January 4, 2017.
13. Achieving our 100% renewable energy purchasing goal and going beyond, published by Google,
December 2016, https://environment.google/resources/, accessed December 11, 2016.
14. Brett Simon and Daniel Finn-Foley, An Industry in Flux: Energy Storage Transitions to New
Markets and New Applications in the US, Greentech Media, September 21, 2016, https://
www.greentechmedia.com/articles/read/Energy-Storage-Transitions-in-the-US, accessed
November 18, 2016.
15. Stephen Lacey, How Distributed Battery Storage Will Surpass Grid-Scale Storage in the US
by 2020, Greentech Media, March 10, 2016, https://www.greentechmedia.com/articles/
read/how-distributed-battery-storage-will-surpass-grid-scale-storage-in-the-us-b, accessed
November 18, 2016.

6. Ibid
7. 2016 Corporate Advanced Energy Commitments, Advanced Energy Economy, December 2016,
http://info.aee.net/growth-in-corporate-advanced-energy-demand-market-benefits-report,
accessed January 4, 2017.
8. Michael Copley, Corporates keep up pressure to loosen utility regulations, SNL, November
15, 2016, https://www.snl.com/web/client?auth=inherit#news/article?id=38388575&KeyPro-
ductLinkType=2, accessed November 18, 2016. 18. Philip Sanders, Chile Energy Auction Gives Bachelet a Success to Boast About, Bloomberg
9. Letha Tawney, Celina Bonugli and Daniel Melling, Green Tariffs Take Off in the US, Expand
Access to Renewable Energy, World Resources Institute, October 27, 2016, http://www.wri.
org/blog/2016/10/green-tariffs-take-us-expand-access-renewable-energy, accessed Decem-
ber 8, 2016.
10. Andy Stone, More Utilities Are Offering Services That Allow Customers to Self-Consume Their
Solar Power, Greentech Media, August 3, 2016, https://www.greentechmedia.com/articles/
read/more-utilities-are-offering-self-consumption-packages, accessed November 18, 2016.
11. Tam Hunt, The Outlook for Hawaiis Solar Market After the End of Net Metering Greentech
Media, March 23, 2016, https://www.greentechmedia.com/squared/read/hawaiis-solar-mar-
ket-after-the-end-of-net-metering, accessed December 6, 2016.
16. Mike Munsell, Corporate Investments in Energy Storage Reach $660 Million in Q3 2016,
Greentech Media, December 6, 2016, https://www.greentechmedia.com/articles/read/corpo-
rate-investments-in-energy-storage-at-660-million-in-q3-2016, accessed November 18, 2016.
17. GTM Research U.S. Energy Storage Monitor splash page, Greentech Media, https://www.
greentechmedia.com/research/subscription/u.s.-energy-storage-monitor, accessed Novem-
ber 18, 2016.
LP, August 18, 2016, https://www.bloomberg.com/news/articles/2016-08-18/chile-s-energy-
industry-a-spot-of-light-in-a-darkening-economy, accessed December 6, 2016.
19. Interview with Florian Kolb & Chris McLachlan of RWE at Bloomberg New Energy Finances
The Future of Energy Summit 2015, https://vimeo.com/125544982, accessed December 6,
2016.
20. As renewable power overtakes coal, heres how Mexico has been doing its part Mexico Now,
October 26, 2016, http://www.mexico-now.com/main/index.php/9-news/1008-renewable-
power-overtakes-coal-here-s-how-mexico-has-been-doing-its-part, accessed December 6,
2016.
21. FERC Proposes to Integrate Electricity Storage into Organized Markets, News Release:
November 17, 2016 Docket No. RM16-23-000, https://www.ferc.gov/media/news-releas-
es/2016/2016-4/11-17-16-E-1.asp#.WE2kro-cFpz, accessed December 7, 2016.

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 Brochure / report title goes here |
 Section title goes here

Marlene Motyka
US Renewable Energy Leader
Deloitte Transactions and
Business Analytics LLP
mmotyka@deloitte.com
+1 973 602 5691
@MarleneMMotyka

Marlene serves as the US Renewable Energy

Leader for Deloitte and is a principal in Deloitte
Transactions and Business Analytics LLP. In
her role as US Renewable Energy leader, she
steers Deloittes overall delivery of a broad
range of cross-spectrum professional services
to renewable energy companies and those
who invest in renewable energy. In addition, for
over twenty years, Marlene has supervised and
performed financial analyses and valuations in
the power and utilities and renewables sectors.

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